Investors are slowly changing their approach while choosing companies to back in the edtech space, with new focus being on non-traditional segments, like startups catering to children aged below eight years.
Startups which help in the learning and personal development for children below eight years of age and also the new-age companies which provide day care and pre-school facilities are the top two themes over the next few years, according to Blume Ventures, an early-stage VC firm. It has backed unicorns like Unacademy and other companies like Classplus.
Apart from the two categories of startups which address the children below the age of eight, Blume has also identified three other spaces that broadly cater to the college-goers and beyond group of learners. These include startups catering to 21st century skills, like entrepreneurial and personal finance, other new-age companies enabling financing options for college-related expenses, platforms which upskill students and employees and startups which are building a community and mentorship network.
“We realised that the first generation of unicorns mostly fall into the core education space. Get good marks, get into college and get a job. However, the last two years have made us rethink our edtech landscape. Based on our learnings, we chose different axes to break down the sector – age group served, core job to be done, and paying customer persona,” Blume said in a recently published report.
The first two categories – where startups that are building for the kids below the age of eight – in total is roughly a $850 million market, Blume’s estimates showed. They’re mainly driven by millennial parents’ “guilt” and “convenience” among other factors.
“As more parents begin to live in nuclear families, and as more women join the workforce, the demand for daycare and pre-schools will increase. This space has remained complex in the Covid era as parents feared sending their children to crowded pre-schools, more parents worked from home, and now as parents begin to go back to offline work again…(other) learning avenues that help students get ahead of their peers are highly bettable,” the report said.
Wonderhood and Kutuki are a few startups which are gamifying the experience for kids, around six years of age, as they learn maths, language and other rhymes or stories. Sportyze, which operates a chain of gyms for kids between the age of 18 months to 8 years, focuses on developing the child physically is another startup Blume named from the categories.
The market where edtechs teach 21st century skills, for personality and social development, is still nascent, Blume said while highlighting it as another opportunity. The “aspirational nature of Indian lower and middle class families pushes the bread-earners to always stretch themselves when it comes to spending on the education of their kids” will open up more avenues for companies like Edufund that helps parents arrange for finances for children will flourish, too.
Startups like GrowthX, which provide cohort-based learning, where people across all walks of life come together to discover, network and learn from peers will see increased investor interest as well, the report said.
Underscoring its conviction in the industry, Blume saw an increased total addressable market (TAM), now at $6 billion from $4 billion in 2020, propelled by Covid. Last week, the VC firm announced the final close of its fourth and biggest fund ever of over $250 million from which it plans to back 30-35 startups across categories.